Speaker 1: We've been talking a lot about the election, but before
Speaker 1: we get there, runners will be off to the races
Speaker 1: this Sunday at the New York City Marathon, and for
Speaker 1: the second consecutive year, Citizens will be the official bank
Speaker 1: of the race. The bank has also announced a one
Speaker 1: hundred thousand dollars grand to help improve green spaces in
Speaker 1: the city. For more on the race and the future
Speaker 1: of Citizens, I'm pleased to say we're joined now by
Speaker 1: Bruce Benson. He is Citizens Financial CEO. Bruce, it's great
Speaker 1: to speak with you again. Interested to see, of course
Speaker 1: that you're sponsoring the marathon for the second year in
Speaker 1: a row, and it really lines up with this push
Speaker 1: that Citizens has made into New York City in particular.
Speaker 1: Where are you on that tell us about the progress
Speaker 1: that you've made in New York City.
Speaker 2: Yeah, so we have been at it now for two
Speaker 2: or three years in New York and.
Speaker 3: It's been really going well.
Speaker 2: So I would say when we look at our regions,
Speaker 2: it's the fastest growing region that we have in the system.
Speaker 2: We're growing households at kind of mid single digits and
Speaker 2: we're growing deposits at mid to high single digits. But
Speaker 2: it certainly is an expensive market and there's a lot
Speaker 2: of competition there, so we've looked for opportunities to elevate
Speaker 2: our brand, and partnering with New York road Runners and
Speaker 2: the New York Marathons such a distinctively New York experience
Speaker 2: really has been beneficial to us.
Speaker 4: I want to get to the rate environment here, Bruce,
Speaker 4: because the FED is starting to cut obviously looks like
Speaker 4: they're going to continue. Is that bad for you? Net
Speaker 4: interest margins is something we instantly think about with banks
Speaker 4: because obviously, especially a local bank will make all of
Speaker 4: its money or the majority of it, from getting more
Speaker 4: on loans than it pays on deposits.
Speaker 3: Yeah, so it's a little complicated.
Speaker 2: Actually, the banks typically are benefited from higher rates, but
Speaker 2: we have different strategies to cope with lower rates, including hedges.
Speaker 2: So I'd say we're pretty neutrally positioned at this point.
Speaker 2: I think that there's other benefits from falling rates, and
Speaker 2: you'd have to take into accounts. So first is it'll
Speaker 2: stimulate more loan demand, so you'll get the volume effect
Speaker 2: that will be beneficial. You also stimulate deal activity, so
Speaker 2: capital markets fees should kick in more, and it's beneficial
Speaker 2: to borrowers, particularly the more levered borrowers like commercial real
Speaker 2: estate owners, will have a chance to refinance at more
Speaker 2: attractive rates, So that'll be good for bank credit costs.
Speaker 2: So you kind of have to look across to all
Speaker 2: of the different ways that banks perform, and lower rates
Speaker 2: I think are going to be beneficial, and that's one
Speaker 2: of the reasons bank stocks have been performing recently, well,
Speaker 2: last thirty days or so.
Speaker 5: You know, Bruce Wee, we have right now price of
Speaker 5: your stock over the last one year surging about eighty
Speaker 5: two percent. Clearly investors look to citizens as a place
Speaker 5: of stability here in a regional banking market where there
Speaker 5: are a lot of other concerns. We have an amazing
Speaker 5: story on Bloomberg right now about how for the first
Speaker 5: time since the Great Financial Crisis, buyers of top rated
Speaker 5: commercial mortgage backed securities are suffering losses with triple A
Speaker 5: bonds going bust. How much more pain is there in
Speaker 5: parts of this real estate market, especially in some of
Speaker 5: these big cities that you're keeping an eye on, And
Speaker 5: what might it mean for the industry.
Speaker 2: Yeah, I would say, you know, all real estate is local,
Speaker 2: so it certainly depends kind of where the properties are
Speaker 2: located and what the tenant structure is.
Speaker 3: If it's an office.
Speaker 2: Location, office is really the area that has to readjust
Speaker 2: so there has to be some losses recognized. You have
Speaker 2: to take some stock out of circulation and basically get
Speaker 2: supplied back to equal demand as companies need less office
Speaker 2: space given the slow return to office trends and the
Speaker 2: kind of permanence of hybrid work arrangements.
Speaker 3: So that's going to play out gradually.
Speaker 2: I think most banks are well reserved for their exposure there.
Speaker 2: We feel we are, so I think it's not big
Speaker 2: on the worry list these days from investors in bank
Speaker 2: stocks that they've seen banks get.
Speaker 3: Their arms around around around most surprises. Currently. It is
Speaker 3: tough on the office segment, but banks are working work it.
Speaker 1: Yeah, it seems definitely like investors have found other things
Speaker 1: to worry about. To your point, I want to talk
Speaker 1: a little bit about private credit here, private capital. It's
Speaker 1: an area that you've highlighted as a potential opportunity for citizens,
Speaker 1: especially when it comes to leverage lending.
Speaker 2: There.
Speaker 1: Where are you on that journey? How do you differentiate
Speaker 1: from some of your peers, particularly in the regional space.
Speaker 2: Yeah, so we've been focused on private capital for a
Speaker 2: long time, so starting with private equity sponsors who increasingly
Speaker 2: own more and more of middle market companies in America.
Speaker 2: So you want to be able to service them, You
Speaker 2: want to be able to show them deal flow, you
Speaker 2: want to be able to finance their transactions. So I
Speaker 2: think we're very well positioned for that. The more recent
Speaker 2: emphasis has been on private credit, so as the private
Speaker 2: equity folks look to expand their overall complexes, they're getting
Speaker 2: into private credit and there's direct players in private credit,
Speaker 2: and they're looking to finance more leverage transactions. In some
Speaker 2: cases they're disintermediating banks, but in many cases banks don't
Speaker 2: play at that end of the leverage spectrum. So banks
Speaker 2: are looking to see how can we serve those players.
Speaker 2: They need credit themselves, so can we lend to their
Speaker 2: fun complexes in a safe and secure way. And I
Speaker 2: also think that we've developed good relationships there and we're
Speaker 2: also having opportunities to lend to those complexes.
Speaker 3: So net I think we're positive.
Speaker 2: As opposed to it being a worry beat in terms
Speaker 2: of kind of opportunities leaving the banking system.
Speaker 1: Right, Well, that's exactly where I wanted to go because
Speaker 1: it seems like private credit that industry, in the banking
Speaker 1: industry are kind of frontemies at this point. And my
Speaker 1: question to you is going to be have you seen
Speaker 1: private credit encroach on your territory? But just to crystallize
Speaker 1: your point, it sounds like you're saying no, Yeah.
Speaker 2: I mean, there will be some deals that we lose
Speaker 2: but at the margin, But for the most part, we're
Speaker 2: playing in our sandbox. They're playing in a slightly different sandbox,
Speaker 2: and then they need banks to make their strategies go,
Speaker 2: so you have to turn that kind of risk into
Speaker 2: an opportunity.
Speaker 5: I'm curious as we get into this part of the cycle,
Speaker 5: when we get into a regular way bank lending to
Speaker 5: consumers as well. Brus, I'd love for you to comment,
Speaker 5: we saw a consumer sentiment really start to tick up
Speaker 5: once again. Do you think that this could be a
Speaker 5: bullish signal for ANII and lending moving forward? Do you
Speaker 5: think people are ready to take on debt to start spending.
Speaker 2: Well, I'd say there's a couple of considerations there. One is,
Speaker 2: the higher rates have been an impediment from people wanting
Speaker 2: to borrow, so as rates come down, that'll stimulate, I
Speaker 2: think more more borrowing and lending. The other aspect has
Speaker 2: been uncertainty, and so I think more broadly in the economy,
Speaker 2: the election coming up and the prognosis are we going
Speaker 2: into a soft landing? Are we going into a recession?
Speaker 2: I think the more we see clarity on that we
Speaker 2: get through the election, we have a better census to
Speaker 2: is the economy holding up? It seems like it is.
Speaker 2: That gives people more confidence. So I would say the
Speaker 2: two things, less uncertainty, more conviction on the path of
Speaker 2: the economy, and then lower rates. The combination all of
Speaker 2: that should mean that there's going to be more loan
Speaker 2: demand as we head into twenty twenty five.
Speaker 4: All right, Bruce, great to get your take on these issues.
Speaker 4: Great to have you on the program.
Speaker 3: Thanks so much for joining us.
Speaker 5: Bruce.
Speaker 4: Fans on there of citizens Financial group. And are you
Speaker 4: gonna run the marathon? No? Does either one of you run?
Speaker 5: I do have I can't do more than that.
Speaker 4: I know you run marathons, right.
Speaker 1: Well, I was a middle distance runner in college, so
Speaker 1: I like to keep the races shorter.
Speaker 4: All right, we're they're saying, yeah, I like to keep
Speaker 4: my race is very short.